Why I Don’t Make Your Financial Decisions For You

Some feedback over the nine years of writing about money on Consumerism Commentary indicates that there are some readers — not necessarily daily readers and fans of a website, but those who are searching online about some finance-related topic and are at best passing by any particular website — are looking for quick answers. People want to be told what to do instead of making a choice on their own, or they want to confirm or affirm that a particular financial decision was a good one.

I’ve never been a fan of flatly telling people what to do, particularly when it comes to financial advice. Financial advice is personal, and it’s difficult to prescribe specific actions to a mass audience. Groups are composed of individuals, and every person has his or her own situation that might differ from the average. Some generalized financial advice fits all sizes and situations, but when you get to the more interesting aspects of personal finance or begin examining the details, that’s not always true.

Motivational speakers who focus on finances succeed — and their success is often defined by their profit from seminars, books, and other products sold to consumers who should probably be saving their money — because there is a great audience of people just waiting for permission to take action. At some level, they know it’s good to focus on their personal finances, but need someone to inspire the first step with a push.

Depending on the motivator, that push might take the form of a big “DENIED” graphic flashing on the television screen or some actionable information about investing in real estate. Regardless of the form, it has the capacity to inspire thinking about personal finance, if it doesn’t permanently damage the listener’s psyche or portfolio. But the more popular the guru, less of the action is a result of thinking and more of the action is a result of blindly following.

I’ve tried to focus on the thinker, and that approach has done well to shape the Consumerism Commentary audience over the years. I certainly have my opinions, but — and perhaps this prevents me from generating a rabid fan base (and I have no problem with that) — I prefer to keep myself out of the advice except occasionally sharing my tempered opinion or stories from my own related experience. I can offer two sides of an argument when there are valid points on both sides, and I try to present them in a way that helps readers consider their own situations and make their own decisions.

Once in a while, I receive a comment in response to a contemplative article like, “I wish you would just tell me what to do.” I want to respond, “I’m not your dad.” Not to bring a cliché into the discussion, but isn’t it better to teach a man to fish than it is to give him a fish? To me, that seems to be the point of education. Provide people with the tools they need to make their own best decisions rather than telling them what to do.

When talking one-on-one, it’s much easier to analyze a situation and provide individualized advice, but when discussing a general issue online, that’s more difficult.

A good way to address the problem of finding answers that are applicable to everyone is to address one specific situation at a time. Given enough situations, readers can often relate to at least one. This is the approach Liz Weston has taken in her latest book, There Are No Dumb Questions About Money, available on the Kindle and from iTunes. The book features many of the questions — describing specific financial situations — Liz has received over the years. Readers of the book are sure to find situations described within that match their own. I’d be happy to take specific financial questions as well. Those I can answer, I will, and for those that require someone who is more of an expert than I am, I will seek an answer from a professional.

It’s a win-win situation, as corporate motivational speakers might say. Questions provide me with great ideas for new articles, and readers receive advice for overcoming their financial obstacles or for making better financial decisions. When it comes to writing for a wider audience, however, I feel I have the responsibility not to tell people what to do, expecting them to blindly follow these suggestions. Being an adult in a society where education is valued is all about thinking for yourself, consulting experts when necessary, and making the best decisions, on your own, that are best for you.

This can certainly be difficult when salespeople are disguised as experts. When you don’t have a lot of friends who understand the mortgage industry, for example, you rely on the bank’s advice for making decisions. If the bank says you qualify for an expensive mortgage and they show you some calculations, however flawed, to prove their point, you trust them. Then you might find yourself in financial trouble when interest rates increase, tax rates increase, or your home loses its market value.

You want to blame the bank, and in some cases, you were misled and you can, but for the most part you have to own your decisions. You can better own those decisions if you are willing to exercise the mental capacity to analyze your situation and the choices confronting you. That’s why I don’t often prescribe a course of action.

There are guidelines, however, that tend to work well regardless of specific situations. Start saving and investing as early as possible. Minimize expenses and maximize income. Spend less than you earn. These are just guidelines, though, and not very specific. Once you start getting into the details, how you go about changing your actions and attitude depend on your individual situation.

People may be looking for a simple answer to questions like, “With some of my extra cash flow, should I invest more or pay off my mortgage.” I can give a simple answer. I could say that the best choice is always to invest more, and I can cite enough supporting evidence to back that statement up with facts, statistics, and reasoning. I could advise readers to pay off the mortgage and have other facts, statistics, and reasoning to support that answer. There are other details you need to know to give informed advice to any household considering this question, however. If you really want the best answer to this question, you would need to share more information, starting with the following:

What is the interest rate on the mortgage?

What is your preferred investment?

How much time do you have left to pay off the mortgage?

How averse are you to risk?

What type of return are you expecting on the investment, and do your expectations have a good chance of being accurate?

What other financial obligations do you have?

How much time do you have left before you’d like to retire?

I don’t see how anyone can offer solid advice without answers to these questions to start, yet people are looking for a quick answer, such as, “It’s always better to pay off your mortgage faster rather than invest when you have extra cash available.” Financial writers can say that, or they say the opposite, but it really doesn’t help anyone in the long run.

To everyone who has come to Consumerism Commentary looking for a quick answer to a complex financial question, I apologize. I may take that approach sometimes, and when readers offer specific questions with enough detail I might entertain one-on-one advice, but when it comes to larger issues affecting a group I am much more likely to consider all sides and encourage readers to analyze their own situations with a little more perspective. With the expanded perspective, readers are better prepared for making their own decisions and taking responsibility for their actions.

As an aside, I don’t always temper my opinions. I’ve been very outspoken about the Debt Avalanche (which as far as I know, is a term coined by me, though the concept certainly existed before) method of paying off credit card debt. I’ve pressed this issue because a strong opinion is necessary to counter the massive marketing machine behind what is known as Dave Ramsey’s Debt Snowball approach. I don’t intend to get into the details here; visit those articles for discussions about why.

The other issue in my opinion (more opinions :-), is the lack of discussion of money and finances within our society. We talk more about sex than money, yet money affects are daily lives much much more. You know as well as I do the lack of education in finance is staggering.

Many times people don’t want to talk to a friend or family member for fear of repercussions, or just maybe embarrassed. The web being a somewhat anonymous medium allows for us to not only read, but ask questions about various financial topics. People are looking to you because you are an expert in their eyes. You might not know everything, nor prevent adding your own color commentary, but you certainly do know more than the average reader. Therefore you are an expert.

It’s fine the stance you have, but people are searching for answers and one of the primary reasons they seek out your site. They have a problem (lack of financial education) and looking for a solution (your site).

You are absolutely right the reason they call it personal finance, is because it’s personal. At least on my site I do state what I discuss is in many cases opinion, and I don’t want to play the role of a “guru”. I would rather discuss my opinion and what has (or hasn’t) worked within my life, and my viewpoint of the world.

That’s one of the reasons I love writing for the internet. Yes, the impersonal, cold internet gives cowards a way to anonymously criticize people without being in reach for getting punched in the face, and it can bring out the worst in people, but it also provides a safe, judgment-free zone for people to ask questions and share their insights without repercussions “IRL.” I certainly give solutions to questions and problems, they just often involve the use of the brain. A lot of people aren’t interested in that type of solution — and I don’t intend for those people to ever to be the audience here, even if it means I can’t have a “cult.” (Fine with that.)

The other aspect you didn’t touch in the article is the legal responsibility of giving any advice. Granted you are not a SEC registered investment advisor. So if anything, you have much less recourse than a “professional”.

With that said, you just can’t make claims on things like guaranteed returns, or other wild statements about an investment. That could get you in trouble with the SEC and/or FTC.

The one thing I DO think we need to much do more of is disclosure. Especially when discussing a specific stock, or investment (ie Lending Club) and ownership of that investment.

I have taken the advice of “talking heads” on TV and lost money doing it. I dislike watching a financial show and hearing the speaker tell people that he/she absolutely knows what the caller should do. People who are so certain of their opinions scare me—-there are too many uncontrollable variables and even experts can get it wrong. Providing information on a site such as this is a better option……..or, if a person doesn’t want to make any financial decisions, pay the price and hire someone to do it for you.

I can understand where you are coming from. I’d probably try to give generic advise with the line this is just an option and you need to make sure it is the best option for you. I’d also try to get as much info as possible but when people answer questions without ANY details and without disclaimers it drives me insane. Yes, your answer works in one set of circumstances but is 100% wrong in another set!

It’s hard because that’s the way the world is these days; we look for the quick and easy, not for the things that we have to think about. But you are right, personal finance is SO very personal that you can’t just give an answer that will be right for everyone, and even if you look into the person’s situation, the answer you give may not even be right for them. Research and free thinking should be the basis behind financial decisions, not just “because he told me so”.

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About Luke Landes

Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke has contributed to PC World Magazine, US News, Forbes, and other publications. Read more about Luke and about Consumerism Commentary.

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